As a high earner, you face unique opportunities and challenges when it comes to retirement planning. While higher earnings come with more complex tax implications, they also present more ways to save. At Moran Wealth Management, an Independent Registered Investment Advisor, we provide personalized investment guidance for high net worth individuals, families, and institutions. By using the right approaches, you can build retirement savings that support long term financial goals.
We will walk through key retirement savings strategies specifically for high earners, including tax deferred options and how to structure your 401(k) contributions. With these ideas, you can develop a retirement plan that supports your lifestyle and long term objectives.
1. Contribute the Maximum to Your 401(K)
For high earners, contributing up to the allowable amount in your 401(k) is one effective strategy for retirement savings. In 2025, the contribution limit for 401(k) plans is $23,000, plus a $7,500 catch up contribution for individuals aged 50 and older. That means you could contribute a total of $30,500 annually, which can increase the growth potential of your retirement savings.
Here’s why this matters:
- Tax-deferred growth: Contributions to your 401(k) reduce your taxable income for the year and your investments grow tax deferred until withdrawal.
- Employer match: Many employers offer matching contributions, which can add to your retirement savings. Be sure to contribute enough to receive the full match if available.
- Compound interest: The more you contribute, the more your money can grow over time due to compounding.
Contribution rules change periodically. Review current IRS guidance and your plan documents.
2. Leverage Roth IRA and Backdoor Roth Strategies
High earners are often ineligible to contribute directly to a Roth IRA due to income limits. However, the “backdoor Roth” strategy allows you to still take advantage of Roth IRA benefits, helping you make a more strategic decision in building a retirement plan for your future.
Here’s how it works:
- Contribute to a traditional IRA: You can contribute to a traditional IRA regardless of income level.
- Convert to a Roth IRA: After funding a traditional IRA, you can convert it to a Roth IRA. Taxes may be due on pre tax amounts at conversion, and the pro rata rule can apply. A Roth allows tax free growth and tax free qualified withdrawals in retirement.
Moran Wealth Management integrates proactive tax strategies into your overall financial picture. Whether this approach is appropriate depends on your situation and current tax rules.
3. Consider Alternative Investments like Private Equity
As a high earner, you may have flexibility to explore certain alternative investments, including private equity and real estate. These can add diversification and may enhance long term growth potential within a retirement portfolio.
Moran Wealth Management believes clients are best served through an appropriate selection of asset classes. Our investment process includes a focus on alternatives such as private equity and real estate when suitable for a client’s objectives and risk tolerance.
- Private equity: This involves investing in private companies, either directly or through private equity funds. These investments may offer higher return potential compared to traditional stocks and bonds, and they also involve higher risk and reduced liquidity.
Including alternative assets in a retirement plan can provide diversification benefits relative to traditional market swings. Suitability depends on goals, time horizon, and risk tolerance.
4. Tax-Deferred Growth and Tax-Efficient Strategies
One of the most significant advantages for high earners when it comes to retirement savings is the ability to leverage tax-deferred growth. By utilizing tax-deferred accounts like 401(k)s and traditional IRAs, you can reduce your taxable income and allow your savings to grow without paying taxes each year.
In addition to tax-deferred growth, it’s important to consider tax-efficient strategies that help minimize the impact of taxes on your retirement savings:
- Tax-loss harvesting: MWM actively manages client tax situations through tax loss harvesting and other strategies designed for efficient wealth preservation and growth.
- Roth conversions: For those in high tax brackets, converting traditional IRA funds to a Roth IRA in years when your income is lower can help reduce the tax burden on your retirement withdrawals.
- Municipal bonds: Interest from municipal bonds is typically exempt from federal income taxes, making them a great option for tax-efficient income generation.
Using these strategies can help grow retirement savings while managing taxes over time. Outcomes vary based on market conditions and individual circumstances.
5. What is the $1,000-a-Month Rule for Retirement?
A common rule of thumb is the $1,000 a month rule, which suggests saving $1,000 per month for retirement. While this can be a useful starting point, high earners often have the capacity to contribute more. The advantage of this rule is that it breaks down a savings goal into manageable monthly contributions, but high earners should consider saving at a level that aligns with their objectives.
Ways to adjust this rule for high earners:
- Increase contributions: Aim to save a higher percentage of income, especially early in your career, to benefit from compounding.
- Incorporate alternative assets: Consider directing additional savings toward options like private equity or real estate when appropriate and with an understanding of risks.
Starting early and contributing more than a fixed monthly amount can increase what you have saved by retirement. Understanding the importance of starting your retirement planning early can help you stay on track with your goals.
6. How to Set Realistic Retirement Goals
Increasing savings can be helpful, and setting realistic retirement goals is just as important. High earners may want to retire early or maintain a particular standard of living, which influences how much to save. These goals help shape a personalized retirement strategy.
Moran Wealth Management provides guidance across investment management and planning, estate planning, and asset protection strategies. Our team, which includes CFAs®, MBAs, and CFPs®, can help you set realistic, data driven goals.
Here’s how to set your retirement goals:
- Calculate your retirement needs: Estimate how much income you’ll need in retirement to maintain your current lifestyle.
- Assess your risk tolerance: High earners often have more flexibility to take on risk in their portfolios, but it’s important to assess how much risk you’re comfortable with, especially as you approach retirement.
- Factor in inflation: Over time, inflation will erode the purchasing power of your savings, so it’s essential to plan for higher living costs in retirement.
By understanding your retirement needs and setting realistic goals, you can create a savings strategy that supports long term financial security.
Frequently Asked Questions (FAQs)
What is the $1,000 a month rule for retirement?
The $1,000 a month rule suggests contributing $1,000 per month to retirement accounts as a starting point. High earners often target higher savings levels to reflect income and goals.
How many Americans have $1,000,000 in retirement savings?
Only a portion of Americans reach $1 million in retirement savings. For high earners, reaching or exceeding this level can be attainable with consistent saving and planning.
What is the 7% rule for retirement?
The 7% rule suggests that with a diversified portfolio, high earners can potentially achieve an average annual return of 7% over the long term, helping grow their retirement savings significantly.
How many Americans have $500,000 in retirement savings?
Many savers have accumulated around $500,000. Whether this is sufficient depends on spending, longevity, taxes, health care costs, and other goals.
Why Choose Moran Wealth Management
High earners face unique opportunities and challenges in retirement savings. By contributing to workplace plans, evaluating alternatives such as private equity where appropriate, and using tax efficient strategies, you can build a retirement plan that supports long term financial security. Moran Wealth Management offers personalized guidance to help you organize your retirement savings and pursue your financial goals.
Ready to take your retirement savings to the next level? Schedule a consultation with Moran Wealth Management today to develop a retirement strategy tailored to your high-income needs. You can reach the advisory team by phone at 239-439-2968 or via email at info@moranwm.com.